American consumers seem to be on the right track as to the best use of tax refunds. A new survey found that most refund recipients will use the money to pay down debt, followed closely by those who said they will save the money or invest it.
With the average refund this year running at more than $3,100, Americans have learned since the financial crisis and Great Recession that paying down credit card debt or other outstanding loans is a wise move.
According to a new Bankrate.com report, 34 percent of Americans who expect a refund said they would put the money toward lowering their debt load, followed by 33 percent who plan to save or invest their refunds. Twenty-Six percent will spend it on necessities such as food or utilities and just 3 percent will splurge on a vacation or shopping spree (down from 7 percent in 2010), Bankrate said.
Bankrate also found that two-thirds of millennials expect to receive a tax refund this year, more than any other age group. The likelihood of receiving a tax refund decreases with age: just 35 percent of people age 50 and older anticipate getting money back from the government.
Although financial planners oppose receiving a tax refund because it amounts to an interest-free loan to the government, 38 percent of Americans prefer to receive a big refund and another 19 percent prefer a small refund.
“It’s surprising that so many people still prefer to get a big refund, rather than adjust their withholding to get their money throughout the year,” said Bankrate.com tax analyst Kay Bell. “You’d think during lean times, they’d need the money more to meet their monthly expenses. But old and bad tax habits die hard.”
Additionally, Bankrate found that 43 percent of millennials are willing to pay higher taxes in exchange for free college tuition for all students, versus just 20 percent of other adults.
Senior citizens are much more likely than other age group to support higher taxes for repairing and rebuilding roads, bridges and mass transit.
Twenty-two percent of all Americans would welcome higher taxes if they would lead to free health care for anyone who needs it.